India takes another stab at buying into Belaruskali, won't talk contracts with other producers until July
Mint reports senior officials from India's state department for fertilizers will visit Belarus later this month to restart negotiations to buy a stake in the ex-Soviet country's state-owned potash producer.
India was offered 20% of JSC Belaruskali, which together with Canadian and Russian potash players control almost 60% of world production, for $6 billion back in August but balked at the asking price which it believes vastly overvalues the company.
Live Mint reports several roadblocks remain for a deal to be done – apart from the issue of valuation, India is insisting that any offtake agreement with Belaruskali should be made at a discount:
India is also looking at an assured offtake commensurate with the stake bought, according to government officials. “In other words, if we buy a 20% stake, we’re looking at an assured potash offtake of 20% of the total output, and at a discount,” said one of the two government officials cited earlier.
The fertilizer market – worth some $150 billion a year – seems to be heading for an uncertain 2012. Current pricing is around the $500/tonne level after strong gains the past two years. Prices ran up from $100/tonne in 2004 to almost $900/tonne before the 2008 recession when the boom went bust and prices rapidly fell back to $350/tonne.
Apart from steep import prices, the more than 50 million small farmers in India that depend on muriate of potash have to contend with a weak rupee that has caused domestic potash prices to rise more than 150% since 2010 according to Business Standard. Last week India, which imports some 6 million tonnes of potash a year, said it will delay signing new contracts to buy the soil nutrient until July.
Last week The Globe & Mail quoted Canada's National Bank Financial analyst Robert B. Winslow as forecasting that global potash supply will increase more than demand through 2020, which will put a damper on “medium-term” potash prices.
The world's number one producer, Potash Corp. of Saskatchewan Inc. (POT), on Friday announced it will cut production by between 150,000 and 160,000 metric tons by idling its Allan mine for four weeks, citing a wait and see attitude at clients. At the end of last year Mosaic, which together with Agrium and Potash Corp, dominate the fertilizer business, said it is cutting back phosphates production by 250,000 tonnes in the first quarter.
Australia's Fortis Mining this week also announced its plans to buy potash tenements in Kazakhstan is in doubt, with the vendors of the two projects attempting to renege on the deal. The Sydney Morning Herald reports the company has "already paid $30 million to the owners of the two tenements through a company called Wiyot, registered in tax haven Panama, and has warned it may not be possible to recover the money if the deal falls through."
Another Australian firm, Potash West (ASX:PWN), hoping to becomes the first potash miner in the country, in November started drilling on the Dandaragan Plateau at one of the world’s largest known glauconite deposits. The Perth-based company last year expanded it exploration tenure by almost 40% to 2,905km² in Australia’s wheatbelt.